Internal Audit Work Program

Sales & Channel Operation Review

1.0 SALES CHANNEL REVIEW

RISK: Ineffective Channel Sales Operations
W/P Audit procedure Audited by / Reviewed by Completion Date
Ref
Channel Strategy – Enterprise
1) Review effectiveness of the organizational structure of sales and sales support
(eg. Sales admin, Sales Ops, Channel partner management) as follows:
i. Review resource ratio of Sales vs Sales Channel vs Sales support
functions in each region, and determine whether it is effective/efficient.
ii. Review the relevant strategic plan for the current and preceding year, and
assess the success of management’s fulfilment of plan.
iii. Inquire sales initiatives, and determine whether they are aligned to the
overall department strategic plan.
2) Assess effectiveness of strategy communicated and implemented.e.g.
3) Review adequacy and effectiveness of initiatives to augment sales.
i. Enquire all available marketing activities conducted, and sales related
incentive programs rolled out in this region.
ii. Enquire if ROI analysis were prepared to review the cost and benefits of
the various initiatives and programs.
4) Inquire on the adequacy of various partner’s training programs in place to
equip their sales force to sell the Company’s product.
5) Inquire and obtain a list of strategic partners and agreements.
6) Inquire and obtain a list of partners and end users who has access to software
benefits and determine if they are excessive.
7) Review the list of systems and analytical tools that support sales.
i. Take stock of all supporting systems and analytical tools in facilitating and
reporting sales
ii. Inquire into the effectiveness of deployment of Salesforce and other
supporting systems.
iii. Inquire and document systems limitations, if any.
8) Review and assess the success of the strategic plan execution thereof.
i. Review partner feedbacks and comments, if any, to gain insight the issues
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and concerns in the channels.

ii. Inquire if management has pro-actively address partners’ concern
9) Analyze Trends and Ratios
i. Perform booking analysis to determine the top countries in this region for
further review and assessment. Establish the number of distributors/
partners within the country, and the booking from each key partner.
ii. Determine if there is sufficient/ adequate partners to cover the respective
countries and product range (number of resellers, extend of reach etc).
a) Analyze partners’ RMA in the past 8 quarters:
i. Review RMA data by partners and by different categories,and assess
reasonableness in relation to sales volume.
ii. Highlight and investigate any unusual trends eg. excessive returns due to
obsolescence, stock rotation (indication of channel stuffing), product
dissatisfaction etc
b) Review discounts given to various partners, and ascertain if the discounts
are consistent within the country as well as in line with the discounts
granted within ASR.
d) Review the current AR aging, highlight partners with long outstanding
receivables (red flag for channel stuffing) and correlate the partner’s
bookings and investigate the reason for the aged receivables. Check for
bad debts written off and access if these are written off in lieu of discounts.
10) Inquire whether there is a structured partner management to appoint, re-level
and terminate partners.
2.0 PARTNER MANAGEMENT (Enterprise and Consumer)
RISK: Partners Not Effectively Managed
W/P Audit procedures Audited by / Reviewed by Completion Date
Ref

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1) Partner Selection And Qualification Process

i. Review and assess the effectiveness of the partner selection process.
ii. Check for recent partner appointment in the last 12 months, and verify
the criteria used for reasonableness
iii. Check that all evaluations have been properly documented to facilitate
post review.
2) Partner Evaluation
i. Review and determine whether partners have been evaluated on a
regular basis.
ii. Review the partners current year’s performance and match against the
partners’ self professed strength.
iii. For partners which has not performed up to par, check that this has been
formally documented, and adequate follow-up action taken.
3) Partner Re-Leveling Process
i. Inquire into the partner levelling and re-leveling process.
ii. Check for the frequency of such exercise and recent occurrence of
partner re-leveling, and verify its occurrence.
iii. Select a few partners which have recently been re-levelled, and review
documents supporting the re-levelling. Also ensure that the right level of
discounts are exteneded partners based on the new level/band.
4) Partner Termination Process
i. Check for recent partner termination and document the rationale for the
termination.
ii. If poor partner performance is cited, verify that management has
performed an analysis on the partner’s performance for the past 8
quarters to justify the termination.

3.0 PARTNER SOFTWARE BENEFITS PROGRAMS (Enterprise and Consumer)

RISK: Unauthorized Deployment And Sales Of Free Software
W/P Audit procedure Audited by / Reviewed by Completion Date
Ref
1) Not-For-Resale

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a) Review available policies and procedures in place, and assess if there

are adequate controls over the distribution of NFR items.
b) Perform detailed walk-through: Enterprise and Consumer
i. Check that there are qualification criteria to obtain NFR (e.g. only to
specific partners, criteria for internal orders, quantities limitation etc)
ii. Verify that there are specific guidelines on how NFR can be used (e.g.
only for support, not for resale etc)
iii. Review for specified record keeping and reporting requirements by
partners (e.g. distributors/partners need to maintain records for large
quantities request that may be subject to audits etc)
iv. Verify whether there are any validation process performed by Partner
Operations to ensure partner criteria are met before NFR orders are
processed? (e.g. partner tier eligibility for NFR, if NFR requests have
reached their quota, etc)
v. Verify that there are appropriate approving authorities in place (e.g.
high quantities order require additional approval, internal orders etc)
vi. Check that there are preventive clauses in place.
vii. Verify that there are controls that will prevent company personnel from
ordering on behalf of partners

2) Evaluation Software
i. Inquire into the policies and procedures in place over the issuance of
evaluation software for end user
ii. Identify the list of end users and products received from the Company.
iii. Inquire as to the requirement for such products to be provided to the
end user.
iv. Verify that there are controls that will prevent company personnel or
partners from ordering on behalf of end user
v. Determine the risk of such products provided for testing being
replicated and resold illegitimately.
vi. Select a representative sample, and verify that all issuance have been
approved based on business justification prior to dissemination to the
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end user
vii. Verify that there is a provision within the agreement/contract on the
proper disposal of such software

3) Internal Licenses
b) Inquire into the policies and procedures in place over internal licenses.
c) Identify the list of partners who has received such software benefits,
and the list of products received from the company.
iii. Inquire as to their legitimacy of their entitlement, and determine whether
the issuance of such products are properly controlled.
iv. Select a representative sample, and verify that all issuance have been
approved based on agreement, prior to dissemination to partners.
viii. Determine the risk of such products provided for testing being
replicated and resold illegitimately.
v. Verify that there is a provision within the agreement/contract on the
proper disposal of such licenses.

4.0 ORDER PROCESSING and UNLIMITED DOLLAR DEAL REVIEW

RISK: Orders Are Not Processed In Accordance With Various Policies And Procedures
W/P Audit procedure Audited by / Reviewed by Completion Date
Ref
1) Order Processing
i. Obtain understanding of the applicable policies, and the usual procedures
to process deviations. Assess if such deviations are appropriate and
aligned with business objectives.
ii. Select a representative sample from the booking report (to include training
and education) and obtain the order documents and check for the following:

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 Bill-to and Ship-to data in ERP are valid and consistent.

 Product SKUs, quantities, PO total and currency should match to ERP and
distributor’s buy price is per company price list.
 Payment terms should be standard and support duration ordered are
correct.
 Distributor’s PO date should not be earlier than the resellers’ and the End
User (EU) order placement date.
 Quantity contracted are booked into the correct quarter in ERP.
 System approval has been granted as required:
a) For special discounts approval
b) For RMA approval
c) For non-standard term and condition approval
 If applicable, check that the discount or pricing extended was based on the
partner agreement.
 Review whether there have been an extended delay in the fulfilment period
due to the number and types of problem holds (eg. credit hold, trade
compliance hold etc)
iii. Review for evidence whether orders have been split by the same
partner/EU to circumvent the threshold for EU requirement.
iv. Review the RMA exceptions by
 Tracing back to the original order placed by the partner and ascertain if the
order was placed close to QE.
 Identify if there is any valid replacement order by the partner (same EU,
change of specifications etc)
2) Unlimited Dollar Deal Review
Unlimited License Agreement
i. Understand the rationale for unlimited dollar deals through inquiry with
Sales and Country Manager.
ii. Perform testing as follows:
1) Check if the reporting requirements are complied. Ensure that all the
required data are provided on a cumulative basis in the report, as
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follows:
 Product name (including any options, agents and extensions)
 Version Number
 Quantity of each product
 Operating system/platform
 Hardware model
 Location of the computer on which each copy is installed
2) Verify if the agreement has expired or renewed. If expired, check if the
final deployment report has been submitted (15 days after the
deployment period ends). This report should list all deployed copies
installed and in use as of the last day of the deployment period.
3) Determine the compliance to record keeping requirement – information
relating to the use and deployment of the license software acquired
under the agreement.
4) Verify if the install and use the Site Licensed Software on behalf of the
approved Permitted Affiliates, as specified in the agreement.
5) Determine if there are control procedures in ensuring that the Site
Licensed Software was not deployed by another company not
authorised to download.
6) Determine the level of discount extended for reasonableness.
7) Determine if there is a process and controls in place to monitor the
draw down of licenses under the unlimited dollar deal.
8) Enquiry if a post deal analysis was performed to justify the deal.
9) Identify and investigate possible issues under the unlimited dollar deal.

5.0 CONTROLS REVIEW AT DISTRIBUTORS’ SITE (Enterprise)

RISK: Lack Of Effective Internal Controls Increases Risk Of Order Processing Errors
W/P Audit procedure Audited by / Reviewed by Completion Date
Ref
1) Extract a copy of the distributor’s contract, and be familiar with all the terms
and conditions, especially the distributors obligations to the Company.
2) Understand the controls/ policies available at distributor site to ensure orders
placed with the Company complies with the Company’s requirements by

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inquirying the following:

 Key personnel and department that are responsible for the liaison and
the management of the Company’s account.
 Distributor’s stocking guidelines for box products.
 Order processing and the department(s) involved when distributor
receives order from resellers/EU and places order with the Company.
 Any side agreements/ arrangements that has been made between the
distributor and the Company’s sales/channel staff that are not
embodied in the contract.
 Any long outstanding RMAs that are still not processed etc
3) Verify the controls instituted by distributor to ensure validity of order from their
resellers, and processed and booked with the Company.
4) From samples selected in section 4.1, ensure there are back-to-back orders
from distributor’s customer prior to placing the order with the Company.
5) Physically inspect the premise, and determine if there are signs of sales being
front loaded, or channel stuffing activities to take place e.g. old stocks not sold.
6) Select 3 products from the distributor’s weekly inventory report and perform an
inventory count at distributor site to determine the accuracy of inventory
reporting.
 Inquiry, if there is any discrepancies noted
7) Select a representative sample from the weekly sell-through reports and
match against the delivery orders to verify the accuracy of distributor’s sell-
through reporting.
 Inquiry, if there is any discrepancies noted
8) Determine how returns are being managed by the distributors including
destruction and notification process.
9) Ensure that 3rd party destruction agents are properly engaged based on set
guideline
10) Inquiry distributor/direct reseller’s level of awareness of the Company’s
violation reporting vechicle that is made available to any employee, customer
or any other individual that would like to report a concern.
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11) Inquiry if distributor/direct reseller has been provided adequate support and
engagement from the Sales Rep.

6.0 MARKETING DEVELOPMENT FUNDS (MDF)PROGRAMS (Enterprise and Consumer)

RISK: MDF Spending Not Structured And Not Formally Monitored To Ensure They Are Achieve Marketing Objective
W/P Audit procedure Audited by / Reviewed by Completion Date
Ref
1) Interview the marketing personnel and determine:
i. A clear definition of MDF
ii. Assess if marketing is operating independently of sales channel managers.
iii. Document all possible funding sources (eg. regional, global, country-
specific).
iv. Obtain a copy of the MDF policy, if available, and a list of activities which
are eligible under MDF.
v. Assess if there is proper tracking during disbursement of MDF and the
process of compilation of MDF spending.
vi. Determine if there are adequate controls over approval of MDF activities
and if there are any overlaps with other incentives offered to the same
partner.
vii. Verify if management has performed a variances analysis ie. Budget vs
Actual and check if roll forward is allowed for any unused funds.
viii. Verify if ROI analysis has been performed and assess if MDF paid has
achieved its objective from an overall business perspective.
2) Obtain a listing of MDF payments for the past 4 quarters and select
representative sample to ensure basis for MDF payment ie. appropriate
approval and sufficient supporting documentation has been obtained before
disbursement.

7.0 SALES CHANNEL REVIEW (Consumer)

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RISK: Ineffective Channel Sales Operations

W/P Audit Procedure Audited by / Reviewed by Completion Date
Ref
Channel Stategy – Retail Business
1) Review effectiveness of the organizational structure of sales and sales support
functions (eg. Sales admin, Sales Ops, Channel partner management) as
follows:
i. Review ratio of Sales Channel vs Sales vs Sales support functions in each
country, and determine whether it is effective/efficient.
ii. Review the regional Sales Channel strategy and scorecard for the current
and preceding year, and assess management fulfilment of plan.
iii. Determine sales initiatives and determine whether they are aligned to the
strategic plan.
2) Assess effectiveness of how the strategy was communicated and
implemented.e.g.
i. Frequency of All-hands sessions conducted
ii. Other modes of communications
3) Review the adequacy and effectiveness of various initiatives to augment sales.
i. Enquire of all marketing related activities conducted and sales incentive
programs rolled out in the region.
ii. Enquire if ROI analysis were prepared by marketing and sales to review the
cost and benefits of the various initiatives and programs.
4) Review the list of systems and analytical tools that support Consumer sales.
i. Take stock of all the supporting systems and analytical tools in facilitating
and reporting sales.
ii. Enquire the effectiveness of deployment of Salesforce and other supporting
systems.
iii. Enquire and document systems limitations, if any.
Analyze Trends and Ratios
a) Perform booking analysis to determine the top 3 regions for further review
and assessment.
i. Establish the number of distributors/ partners within the country, and
the booking from each key partner.

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ii. Determine if there is sufficient/ adequate partners to cover the

respective countries and product range (number of resellers, extend of
reach etc).
b) Analyze partners’ RMA in the past 8 quarters:
i. Review RMA data by partners and by different categories,and assess
reasonableness in relation to sales volume.
ii. Highlight and investigate any unusual trends eg. excessive returns due
to obsolescence, stock rotation (indication of channel stuffing), product
dissatisfaction etc
c) Review discounts given to various partners, and ascertain if the discounts
are consistent within the country as well as in line with the discounts
granted within the region.
5) Enquire how returns are managed, including destruction and notification
process.

8.0 CONTROLS REVIEW AT DISTRIBUTORS’ SITE (Consumer)

RISK: Lack Of Effective Internal Controls Increases Risk Of Order Processing Errors
W/P Audit procedure Audited by / Reviewed by Completion Date
Ref
1) Extract a copy of the distributor’s contract, and be familiar with all the terms
and conditions, especially the distributors obligations to the Company.
2) Understand the mechanism that trigger the order from distributor to the
Company by inquirying the following:
 Key personnel and department that are responsible for the liaison and
the management of the Company’s account.
 Distributor’s stocking guidelines for Consumer box products.
 Order processing and the department(s) involved when distributor
receives order from resellers/EU and places order with the Company.
 Any side agreements/ arrangements that has been made between the
distributor and the Company’s sales/channel staff that are not
embodied in the contract.
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 Any long outstanding RMAs that are still not processed etc
3) Select 3 products from the distributor’s weekly inventory report and perform an
inventory count at distributor site to determine the accuracy of inventory
reporting.
 Inquiry, if there is any discrepancies noted.
4) Select a representative sample from the weekly sell-through reports and
match against the delivery orders to verify the accuracy of distributor’s sell-
through reporting.
 Inquiry, if there is any discrepancies noted
5) Physically inspect the premise, and determine if there are signs of sales being
front loaded, or channel stuffing activities to take place e.g. old stocks not sold.
6) Determine how returns are managed, including destruction and notification
process.
7) Ensure that 3rd party destruction agents are properly engaged based on set
guideline.
8) Inquiry distributor/direct reseller’s level of awareness of the Company’s
violation reporting vechicle that is made available to any employee, customer
or any other individual that would like to report a concern.
9) Inquiry if distributor/direct reseller has been provided adequate support and
engagement from the Sales Rep.
9.0 FCPA AWARENESS (Enterprise and Consumer)
RISK: Expenses Relating To Government Spending Is Recorded And Reported Incorrectly.
W/P Audit procedure Audited by / Reviewed by Completion Date
Ref
1) Awareness of FCPA compliance requirements in the region
i. Enquire HR on the Sales organization’s participant rate in the Company’s
code of conduct.
ii. Enquiry Legal on the types of FCPA training programs that were
conducted for the Sales organization.

2) Obtain a list of account managers who manage the government accounts.

3) Review the top 10% expense claims in the past 4 quarters and select a
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representative sample from the expenses reports filed by the government

account managers to test check the following:
i. Receipts and supporting documentations were provided on all the
expenses items.
ii. Expenses were categorizes correctly.
iii. Gifts, meals and entertainments, if any, provided to government entities
were not more than US$25 in value.
iv. Evidence of prior approval from CFO and the Office of Compliance were
obtained, if gifts, meals and entertainments exceeded the allowable
amount.
v. Highlight and investigate any irregularities.
4) Interview selected account managers, using the FCPA questionnaire, to
assess their knowledge of FCPA and their understanding of how the accounts
are managed to ensure compliance.
i. Assess the level of awareness about the Company’s violation reporting
vehicle that is made available to any employee, partner, customer or any
other individual that would like to report a concern.

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